PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section contains the company's unaudited consolidated financial statements and accompanying notes for the period [Unaudited Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total Assets | $1,734,984 | $1,668,095 | +$66,889 | | Total Liabilities | $527,687 | $560,219 | -$32,532 | | Total Stockholders' Equity | $1,207,297 | $1,107,876 | +$99,421 | - Goodwill increased significantly from **$585,017 thousand** at December 31, 2023, to **$662,124 thousand** at June 30, 2024, primarily due to the Covenant acquisition at VITAS[21](index=21&type=chunk)[103](index=103&type=chunk) [Unaudited Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Income) | Metric (in thousands, except per share) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Service revenues and sales | $595,880 | $553,816 | $1,185,113 | $1,113,973 | | Net income | $70,887 | $53,377 | $135,904 | $107,498 | | Diluted EPS | $4.65 | $3.51 | $8.89 | $7.09 | [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash provided by operating activities | $162,066 | $192,809 | -$30,743 | | Net cash used by investing activities | ($112,874) | ($33,534) | -$79,340 | | Net cash used by financing activities | ($90,247) | ($73,477) | -$16,770 | | Cash and cash equivalents at end of period | $222,903 | $159,924 | +$62,979 | - Business combinations, net of cash acquired, significantly increased cash used in investing activities to **$92,300 thousand** in the first six months of 2024, compared to $305 thousand in the same period of 2023[27](index=27&type=chunk) [Unaudited Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) | Metric (in thousands) | Balance at Dec 31, 2023 | 6 Months Ended June 30, 2024 | Balance at June 30, 2024 | | :-------------------- | :---------------------- | :--------------------------- | :----------------------- | | Total Stockholders' Equity | $1,107,876 | +$99,421 | $1,207,297 | | Net income | | +$135,904 | | | Dividends paid | | ($12,107) | | | Stock awards and exercise of stock options | | +$64,510 | | | Purchases of treasury stock | | ($88,113) | | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation) The unaudited consolidated financial statements are prepared in accordance with SEC Regulation S-X - Financial statements are prepared in accordance with **Rule 10-01 of SEC Regulation S-X**, with certain GAAP disclosures omitted[38](index=38&type=chunk) - VITAS utilizes a cloud computing arrangement for human resources, with approximately **$5.6 million capitalized** and amortized over 5.7 years[40](index=40&type=chunk) - The effective income tax rate was **24.5% in Q2 2024** (vs 24.1% in Q2 2023) and **23.8% in H1 2024** (vs 24.0% in H1 2023)[41](index=41&type=chunk)[42](index=42&type=chunk) [Note 2. Revenue Recognition](index=9&type=section&id=Note%202.%20Revenue%20Recognition) This note details revenue recognition policies under ASC 606 for the VITAS and Roto-Rooter segments - Revenue recognition for both segments follows **ASC 606**, with performance obligations generally satisfied over time for VITAS and at a point in time for Roto-Rooter's core services[53](index=53&type=chunk)[73](index=73&type=chunk) [VITAS Revenue Recognition](index=9&type=section&id=VITAS%20Revenue%20Recognition) VITAS recognizes service revenue on a daily or hourly basis, primarily from Medicare, Medicaid, and commercial insurers | VITAS Net Revenue (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Medicare | $352,998 | $304,072 | $688,295 | $599,017 | | Medicaid | $15,822 | $14,100 | $30,953 | $27,750 | | Commercial | $9,356 | $8,426 | $18,260 | $15,915 | | Total Subtotal | $378,176 | $326,598 | $737,508 | $642,682 | | Medicare cap adjustment | ($1,375) | ($2,750) | ($3,750) | ($5,500) | | Implicit price concessions | ($3,820) | ($3,237) | ($7,910) | ($6,346) | | Room and board, net | ($3,156) | ($2,904) | ($6,101) | ($5,672) | | Net revenue | $374,558 | $320,861 | $728,564 | $631,339 | - The cost of providing charity care was **$2.2 million** for the quarter ended June 30, 2024, and **$4.4 million** for the six months ended June 30, 2024[55](index=55&type=chunk) - None of VITAS' hospice programs exceeded the payment limits on inpatient services during the three months ended June 30, 2024 and 2023[60](index=60&type=chunk) [Roto-Rooter Revenue Recognition](index=12&type=section&id=Roto-Rooter%20Revenue%20Recognition) Roto-Rooter recognizes revenue for core services upon job completion and over time for franchisee fees | Roto-Rooter Net Revenue (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Drain cleaning | $57,865 | $60,362 | $119,486 | $126,851 | | Plumbing | $46,046 | $48,719 | $94,144 | $99,172 | | Excavation | $55,713 | $57,552 | $114,331 | $117,128 | | Water restoration | $42,777 | $44,978 | $89,454 | $95,741 | | Independent contractors | $18,255 | $21,875 | $37,871 | $45,175 | | Franchisee fees | $1,398 | $1,388 | $2,890 | $2,739 | | Net revenue | $221,322 | $232,955 | $456,549 | $482,634 | - Roto-Rooter's short-term core services (plumbing, drain and sewer cleaning, and excavation) and water restoration services recognize revenue **upon completion of each job**[69](index=69&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) - Revenue from independent contractors and franchisees is recognized **over time** (weekly or monthly) as the services are provided and payments are received[75](index=75&type=chunk)[77](index=77&type=chunk) [Note 3. Segments](index=14&type=section&id=Note%203.%20Segments) This note provides a breakdown of after-tax income by business segment, showing growth in VITAS and a decline in Roto-Rooter | After-tax Income (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | VITAS | $49,252 | $26,128 | $93,221 | $50,892 | | Roto-Rooter | $40,517 | $44,374 | $81,371 | $92,027 | | Corporate | ($18,882) | ($17,125) | ($38,688) | ($35,421) | | Total Net Income | $70,887 | $53,377 | $135,904 | $107,498 | [Note 4. Earnings per Share](index=15&type=section&id=Note%204.%20Earnings%20per%20Share) This note details the computation of basic and diluted earnings per share, showing an increase in diluted EPS | EPS (in thousands, except per share) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $70,887 | $53,377 | $135,904 | $107,498 | | Diluted Earnings per Share | $4.65 | $3.51 | $8.89 | $7.09 | | Average number of shares outstanding (Diluted) | 15,251 | 15,219 | 15,295 | 15,167 | - **310,000 stock options** were excluded from the computation of dilutive earnings per share for the three and six months ended June 30, 2024, as they would have been anti-dilutive[85](index=85&type=chunk)[86](index=86&type=chunk) [Note 5. Long-Term Debt and Lines of Credit](index=15&type=section&id=Note%205.%20Long-Term%20Debt%20and%20Lines%20of%20Credit) The company maintains a $550 million credit facility and is compliant with all debt covenants - The 2022 Credit Facilities consist of a five-year **$450.0 million revolver** and a five-year **$100.0 million term loan**, with a floating interest rate[87](index=87&type=chunk)[133](index=133&type=chunk) - The company has approximately **$404.8 million of unused lines of credit** available under its revolving credit facility as of June 30, 2024, and is in compliance with all debt covenants[89](index=89&type=chunk)[135](index=135&type=chunk)[148](index=148&type=chunk) - Prepayments totaling **$96.3 million** were made on the term loan in Q1 and April 2023, reducing the total borrowing capacity from $550.0 million to $450.0 million[84](index=84&type=chunk)[134](index=134&type=chunk) [Note 6. Other Income – Net](index=16&type=section&id=Note%206.%20Other%20Income%20%E2%80%93%20Net) Other income increased significantly, driven by market value adjustments on deferred compensation assets and higher interest income | Other Income - Net (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Market value adjustment on assets held in deferred compensation trust | $2,637 | $1,504 | $10,971 | $1,184 | | Interest income | $3,495 | $113 | $7,737 | $263 | | Total other income - net | $6,132 | $1,609 | $18,709 | $1,506 | [Note 7. Leases](index=16&type=section&id=Note%207.%20Leases) The company's lease portfolio primarily consists of real estate operating leases with a weighted average remaining term of 4.75 years | Lease Information (in thousands) | June 30, 2024 | December 31, 2023 | | :------------------------------- | :------------ | :---------------- | | Operating lease assets | $132,262 | $126,387 | | Total operating lease liabilities | $146,402 | $139,411 | - The weighted average remaining lease term for operating leases is **4.75 years**, and the weighted average discount rate is **3.51%** as of June 30, 2024[96](index=96&type=chunk) - Roto-Rooter leases equipment to certain independent contractors, which are classified as operating leases[91](index=91&type=chunk) [Note 8. Stock-Based Compensation Plans](index=18&type=section&id=Note%208.%20Stock-Based%20Compensation%20Plans) The company granted Performance Stock Units (PSUs) contingent on TSR and EPS targets, including a one-time grant to the former CFO - **7,133 Performance Stock Units (PSUs)** tied to Total Shareholder Return (TSR) and **7,133 PSUs** tied to Earnings Per Share (EPS) targets were granted in February 2024[98](index=98&type=chunk)[99](index=99&type=chunk) - A one-time grant of 6,424 PSUs to the former Chief Financial Officer resulted in a **$5.3 million compensation expense** recognized in SG&A for the period ended March 31, 2024[100](index=100&type=chunk) [Note 9. Retirement Plans](index=18&type=section&id=Note%209.%20Retirement%20Plans) Net gains from the company's defined contribution retirement plans increased for the three and six-month periods | Net Gains from Retirement Plans (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :--------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net gains | $6,817 | $5,550 | $20,238 | $11,424 | [Note 10. Legal and Regulatory Matters](index=18&type=section&id=Note%2010.%20Legal%20and%20Regulatory%20Matters) VITAS is subject to ongoing regulatory inquiries and is appealing a $50.3 million overpayment demand from its MAC - VITAS is appealing a **$50.3 million overpayment demand** from its Medicare Administrative Contractor (MAC) related to an OIG audit of elevated level-of-care hospice services[112](index=112&type=chunk)[113](index=113&type=chunk) - VITAS deposited **$50.3 million** under the 'Immediate Recoupment' process to preserve its appeal rights and has been refunded **$3.34 million** to date[113](index=113&type=chunk) [Note 11. Concentration of Risk](index=19&type=section&id=Note%2011.%20Concentration%20of%20Risk) VITAS faces significant concentration risk from Medicare and Medicaid receivables and reliance on single-source vendors - Approximately **85% of VITAS' consolidated net accounts receivable** as of June 30, 2024, were from Medicare (73%) and various state Medicaid programs (22%)[116](index=116&type=chunk) - VITAS obtains the majority of its pharmacy services and medical supplies from **single vendors**, which could adversely impact operations if disrupted[117](index=117&type=chunk) [Note 12. Cash Overdrafts and Cash Equivalents](index=19&type=section&id=Note%2012.%20Cash%20Overdrafts%20and%20Cash%20Equivalents) Cash overdrafts were eliminated as of June 30, 2024, and excess cash is invested in money market funds - **No cash overdrafts** were included in accounts payable at June 30, 2024, compared to **$15.7 million** at December 31, 2023[118](index=118&type=chunk) - The company invests excess cash in money market funds holding US Treasuries[119](index=119&type=chunk) [Note 13. Other Assets](index=19&type=section&id=Note%2013.%20Other%20Assets) Other assets primarily include a deposit with OAS related to the Medicare audit and cash surrender value life insurance | Other Assets (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Deposit with OAS | $46,968 | $46,968 | | Cash surrender value life insurance | $3,754 | $3,651 | | Total other assets | $55,918 | $55,618 | [Note 14. Other Current Liabilities](index=19&type=section&id=Note%2014.%20Other%20Current%20Liabilities) Total other current liabilities decreased, driven by reductions in Medicare cap liability and accrued bonuses | Other Current Liabilities (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------------------------------- | :------------ | :---------------- | | Medicare cap | $8,916 | $13,245 | | Accrued advertising | $3,102 | $4,641 | | Healthcare worker retention bonus | $2,975 | $8,901 | | Accrued legal | $640 | $6,386 | | Total other current liabilities | $39,310 | $55,574 | [Note 15. Financial Instruments](index=20&type=section&id=Note%2015.%20Financial%20Instruments) The company's financial instruments are measured at fair value using Level 1 inputs, and long-term debt fair value approximates carrying value - Investments of deferred compensation plans and cash equivalents are measured at fair value using **Level 1 inputs** (quoted prices in active markets)[126](index=126&type=chunk) - The fair value of long-term debt approximates its carrying value due to its **floating interest rate**, which is reset at short-term intervals[1](index=1&type=chunk) [Note 16. Capital Stock Repurchase Plan Transactions](index=20&type=section&id=Note%2016.%20Capital%20Stock%20Repurchase%20Plan%20Transactions) The company repurchased 150,000 shares in H1 2024, with $225.9 million remaining under the current authorization | Share Repurchase Activity (in thousands, except per share) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :------------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total cost of repurchased shares | $55,769 | $13,425 | $88,113 | $13,425 | | Shares repurchased | 100,000 | 25,000 | 150,000 | 25,000 | | Weighted average price per share | $557.68 | $536.98 | $587.41 | $536.98 | - As of June 30, 2024, **$225.9 million of authorization** remains under the existing share repurchase plan[12](index=12&type=chunk)[204](index=204&type=chunk) [Note 17. Acquisitions](index=21&type=section&id=Note%2017.%20Acquisitions) VITAS and Roto-Rooter completed acquisitions totaling $92.3 million in cash, contributing to a $77.1 million increase in goodwill - VITAS completed the purchase of hospice operations and an assisted living facility from Covenant Health for **$85.0 million in cash** on April 17, 2024[3](index=3&type=chunk)[8](index=8&type=chunk) - Roto-Rooter completed the acquisition of two franchises for a total of **$7.3 million in cash** in March 2024[13](index=13&type=chunk) - Business combinations resulted in a **$77.1 million increase in goodwill**, primarily due to the Covenant acquisition at VITAS[103](index=103&type=chunk) | Pro Forma Financials (in thousands, except per share) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :---------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Service revenues and sales | $598,164 | $567,756 | $1,202,245 | $1,141,852 | | Net income | $71,450 | $55,154 | $140,129 | $111,052 | | Diluted earnings per share | $4.68 | $3.62 | $9.16 | $7.32 | [Note 18. Recent Accounting Standards](index=21&type=section&id=Note%2018.%20Recent%20Accounting%20Standards) The company is currently analyzing the impact of new FASB Accounting Standards Updates on its financial statements - The company is analyzing the impact of **ASU 2023-07** (Reportable Segments) and **ASU 2023-09** (Income Tax Disclosure) on its footnote disclosures[104](index=104&type=chunk)[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's analysis of financial condition, operating results, liquidity, and segment performance [Executive Summary](index=22&type=section&id=Executive%20Summary) Chemed Corporation operates through its two wholly-owned subsidiaries, VITAS Healthcare and Roto-Rooter Group - Chemed operates two wholly-owned subsidiaries: **VITAS Healthcare Corporation** (hospice care) and **Roto-Rooter Group, Inc.** (plumbing and drain cleaning services)[107](index=107&type=chunk) - The vast majority of the company's operations are located in the United States, and employees are considered the most critical resource[108](index=108&type=chunk) | Key Operating Results (in thousands, except per share) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :----------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Service revenues and sales | $595,880 | $553,816 | $1,185,113 | $1,113,973 | | Net income | $70,887 | $53,377 | $135,904 | $107,498 | | Diluted EPS | $4.65 | $3.51 | $8.89 | $7.09 | | Adjusted net income | $83,419 | $62,112 | $163,250 | $126,836 | | Adjusted diluted EPS | $5.47 | $4.08 | $10.67 | $8.36 | | Adjusted EBITDA | $119,890 | $96,300 | $234,512 | $196,417 | | Adjusted EBITDA as a % of revenue | 20.1% | 17.4% | 19.8% | 17.6% | [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity and capital resources are satisfactory, with $404.8 million of unused credit available - The company has approximately **$404.8 million of unused lines of credit** available under its revolving credit facility as of June 30, 2024[135](index=135&type=chunk) - Management believes its liquidity and sources of capital are **satisfactory** for the company's needs in the foreseeable future[136](index=136&type=chunk) - Net cash provided by operating activities **decreased by $30.7 million** from June 30, 2023, to June 30, 2024, mainly due to changes in working capital[146](index=146&type=chunk) [Commitments and Contingencies](index=24&type=section&id=Commitments%20and%20Contingencies) The company is subject to various lawsuits and regulatory inquiries, particularly concerning Medicare and Medicaid billing at VITAS - The company is subject to various lawsuits and claims, and periodically receives communications from governmental and regulatory agencies concerning **Medicare and Medicaid billing requirements** at its VITAS subsidiary[149](index=149&type=chunk) - Reserves are established for specific, uninsured liabilities deemed probable and estimable, but a reasonable estimate of potential liability is often not possible due to litigation uncertainty[149](index=149&type=chunk) [Financial Condition](index=24&type=section&id=Financial%20Condition) Material balance sheet changes include increased goodwill from acquisitions and decreased accounts payable and other current liabilities - Investments of deferred compensation plans increased by **$14.7 million** due to market valuation gains, with a similar increase in the associated liability[140](index=140&type=chunk) - Goodwill increased by **$77.1 million**, primarily due to the Covenant acquisition at VITAS[140](index=140&type=chunk) - Accounts payable decreased by **$21.0 million**, and other current liabilities decreased by **$16.3 million**, driven by timing of payments and reductions in specific liabilities[140](index=140&type=chunk) [Results of Operations - Three months ended June 30, 2024 versus 2023](index=25&type=section&id=Results%20of%20Operations%20-%20Three%20months%20ended%20June%2030%2C%202024%20versus%202023) Consolidated revenues increased 7.6% in Q2 2024, driven by VITAS's growth, leading to a 32.8% increase in net income [Consolidated Results (Three Months)](index=25&type=section&id=Consolidated%20Results%20(Three%20Months)) Consolidated revenues increased by 7.6% for Q2 2024, with net income rising by 32.8% and gross margin improving to 34.6% | Consolidated Financials (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | % Change | | :------------------------------------- | :--------------------------- | :--------------------------- | :------- | | Service revenues and sales | $595,880 | $553,816 | 7.6% | | Net income | $70,887 | $53,377 | 32.8% | | Consolidated gross margin | 34.6% | 32.4% | +2.2 pp | - SG&A expenses before long-term incentive compensation **increased by 4.7%** due mainly to normal salary increases and an increase in variable selling expenses[155](index=155&type=chunk) - The effective tax rate increased to **24.5%** in Q2 2024 from 24.1% in Q2 2023[158](index=158&type=chunk) [Segment Results (Three Months)](index=27&type=section&id=Segment%20Results%20(Three%20Months)) VITAS' after-tax earnings increased by 88.5%, while Roto-Rooter's net income decreased by 8.7% due to declining revenue | After-tax Income (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | % Change | | :------------------------------ | :--------------------------- | :--------------------------- | :------- | | VITAS | $49,252 | $26,128 | 88.5% | | Roto-Rooter | $40,517 | $44,374 | (8.7)% | | Corporate | ($18,882) | ($17,125) | (10.3)% | - VITAS' gross margin increased to **23.8%** (from 18.0%) primarily due to increased revenues and the expiration of the **$12.8 million** Retention Bonus Program[154](index=154&type=chunk) - Roto-Rooter's net income was negatively impacted by declining revenue, with after-tax earnings as a percent of revenue at **18.3%** in Q2 2024, compared to 19.0% in Q2 2023[162](index=162&type=chunk) [Results of Operations - Six months ended June 30, 2024 versus 2023](index=28&type=section&id=Results%20of%20Operations%20-%20Six%20months%20ended%20June%2030%2C%202024%20versus%202023) Consolidated revenues increased 6.4% in H1 2024, driven by VITAS's growth, leading to a 26.4% increase in net income [Consolidated Results (Six Months)](index=28&type=section&id=Consolidated%20Results%20(Six%20Months)) Consolidated revenues increased by 6.4% for H1 2024, with net income rising by 26.4% and gross margin improving to 34.6% | Consolidated Financials (in thousands) | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | % Change | | :------------------------------------- | :--------------------------- | :--------------------------- | :------- | | Service revenues and sales | $1,185,113 | $1,113,973 | 6.4% | | Net income | $135,904 | $107,498 | 26.4% | | Consolidated gross margin | 34.6% | 33.1% | +1.5 pp | - SG&A expenses before long-term incentive compensation **increased by 2.5%** due mainly to normal salary increases and an increase in variable selling expenses[168](index=168&type=chunk) - The effective tax rate slightly decreased to **23.8%** in H1 2024 from 24.0% in H1 2023[169](index=169&type=chunk) [Segment Results (Six Months)](index=30&type=section&id=Segment%20Results%20(Six%20Months)) VITAS' after-tax earnings increased by 83.2%, while Roto-Rooter's net income decreased by 11.6% due to declining revenue | After-tax Income (in thousands) | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | % Change | | :------------------------------ | :--------------------------- | :--------------------------- | :------- | | VITAS | $93,221 | $50,892 | 83.2% | | Roto-Rooter | $81,371 | $92,027 | (11.6)% | | Corporate | ($38,688) | ($35,421) | (9.2)% | - VITAS' gross margin increased to **23.5%** (from 18.2%) primarily due to increased revenues and the expiration of the **$23.8 million** Retention Bonus Program[166](index=166&type=chunk) - Roto-Rooter's gross margin slightly declined to **52.4%** (from 52.7%) due to declining revenue, negatively impacting net income[166](index=166&type=chunk)[177](index=177&type=chunk) [Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA](index=35&type=section&id=Unaudited%20Consolidating%20Summary%20and%20Reconciliation%20of%20Adjusted%20EBITDA) This section reconciles net income to Adjusted EBITDA, showing consolidated Adjusted EBITDA increased for both Q2 and H1 2024 | Adjusted EBITDA (in thousands) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | VITAS | $65,600 | $35,085 | $123,912 | $68,630 | | Roto-Rooter | $59,801 | $65,880 | $120,451 | $137,723 | | Corporate | ($5,511) | ($4,665) | ($9,851) | ($9,936) | | Consolidated Adjusted EBITDA | $119,890 | $96,300 | $234,512 | $196,417 | - Adjusted EBITDA as a percentage of revenue increased to **20.1% for Q2 2024** (from 17.4%) and **19.8% for H1 2024** (from 17.6%)[5](index=5&type=chunk) [Reconciliation of Adjusted Net Income](index=37&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Income) This section reconciles reported net income to adjusted net income, excluding non-cash and discrete items | Adjusted Net Income (in thousands, except per share) | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :--------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income as reported | $70,887 | $53,377 | $135,904 | $107,498 | | Adjusted net income | $83,419 | $62,112 | $163,250 | $126,836 | | Diluted Earnings Per Share As Reported | $4.65 | $3.51 | $8.89 | $7.09 | | Adjusted Diluted Earnings Per Share | $5.47 | $4.08 | $10.67 | $8.36 | - Full-year 2024 adjusted diluted EPS guidance was raised to a range of **$23.55 to $23.80**, from the previous range of $23.30 to $23.70[145](index=145&type=chunk) [Operating Statistics (VITAS)](index=38&type=section&id=Operating%20Statistics%20(VITAS)) This section provides detailed operating statistics for VITAS, showing a 13.0% increase in total days of care for H1 2024 | VITAS Operating Statistics | 3 Months Ended June 30, 2024 | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Net Revenue ($000) | $374,558 | $320,861 | $728,564 | $631,339 | | Total Days of Care | 1,914,284 | 1,673,710 | 3,703,788 | 3,278,391 | | Average Daily Census (days) | 21,036 | 18,392 | 20,350 | 18,114 | | Total Admissions | 17,334 | 15,611 | 32,245 | 31,790 | | Average length of stay (days) | 100.6 | 99.5 | 102.2 | 99.7 | | Median length of stay (days) | 18.0 | 16.0 | 17.0 | 15.0 | - The increase in service revenues at VITAS is comprised primarily of a **14.4% increase in days-of-care** for Q2 2024 (**13.0% for H1 2024**)[151](index=151&type=chunk)[164](index=164&type=chunk) - Cerebrovascular diagnoses accounted for **42.5% of the Average Daily Census** and 27.1% of Total Admissions for Q2 2024[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk from its variable interest line of credit, though no such debt was outstanding - The company's primary market risk exposure relates to **interest rate risk** through its variable interest line of credit[197](index=197&type=chunk) - As of June 30, 2024, the company had **no variable rate debt outstanding**[197](index=197&type=chunk) - For each $10 million borrowed, a **100 basis point (1%) change** in interest rate impacts annual interest expense by **$100,000**[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were evaluated and deemed effective, with no material changes in internal control - The effectiveness of the design and operation of disclosure controls and procedures was evaluated and concluded to be **effective** as of June 30, 2024[199](index=199&type=chunk) - There has been **no material change** in internal control over financial reporting during the quarter covered by this report[199](index=199&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is cross-referenced to Note 10, Legal and Regulatory Matters - For information regarding the company's legal proceedings, refer to **Note 10, Legal and Regulatory Matters**, under Part I, Item 1 of this Quarterly Report on Form 10-Q[200](index=200&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's most recent Annual Report - There have been **no other material changes** from the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K[201](index=201&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity, with $225.9 million remaining authorized under the current program | Share Repurchase Activity (February 2011 Program) | Q1 2024 Total | Q2 2024 Total | H1 2024 Total | | :------------------------------------------------ | :------------ | :------------ | :------------ | | Total Number of Shares Repurchased | 50,000 | 100,000 | 150,000 | | Weighted Average Price Paid Per Share | $646.87 | $557.68 | $587.41 | | Dollar Amount Remaining Under The Program | $281,710,685 | $225,943,169 | $225,943,169 | - As of June 30, 2024, **$225.9 million of authorization** remains under the February 2011 repurchase program[204](index=204&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures for the period - No mine safety disclosures were reported[206](index=206&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - No other information was reported[207](index=207&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and iXBRL formatted financial statements - Exhibits include certifications (EX-31.1, EX-31.2, EX-32.1, EX-32.2) and iXBRL formatted financial statements (EX-101, EX-104)[211](index=211&type=chunk)[212](index=212&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) The report is duly signed by the President and Chief Executive Officer and the Vice President, Chief Financial Officer and Controller - The report is signed by **Kevin J. McNamara** (President and Chief Executive Officer) and **Michael D. Witzeman** (Vice President, Chief Financial Officer and Controller) on July 26, 2024[210](index=210&type=chunk)[214](index=214&type=chunk)

Financial Data and Key Metrics Changes - Adjusted EBITDA excluding Medicare Cap totaled $67 million in Q2 2024, an increase of 77% compared to the prior year period, with an adjusted EBITDA margin of 17.8%, which is 613 basis points above the prior year [12] - VITAS net revenue was $374.6 million in Q2 2024, a 16.7% increase compared to the prior year, driven by a 14.4% increase in days-of-care and a 2.5% increase in Medicare reimbursement rates [53] - Adjusted EBITDA at Roto-Rooter in Q2 2024 totaled $59.8 million, a decrease of 9.2% compared to the prior year, with an adjusted EBITDA margin of 27% [58] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,334 in Q2 2024, an 11% increase from the same period in 2023, with average daily census (ADC) expanding to 21,036 patients, a 14.4% increase [62] - Roto-Rooter generated quarterly revenue of $221.3 million in Q2 2024, a decrease of 5% compared to the prior year, with residential revenue declining by 1.6% and commercial revenue declining by 8.2% [18][23] - The Covenant Health acquisition is estimated to contribute approximately $30 million to $32 million to VITAS' full-year revenue [60] Market Data and Key Metrics Changes - The acuity mix shift negatively impacted revenue growth by 112 basis points in Q2 2024 compared to the prior year [22] - Roto-Rooter is forecasted to have a 4% to 5% revenue decline in 2024 compared to 2023 [29] - VITAS is expected to see a revenue increase of 16.3% to 17.3% in 2024 compared to 2023 [27] Company Strategy and Development Direction - The company is focused on expanding its workforce and patient capacity, with VITAS expanding its bedside headcount by 234 licensed professionals in Q2 2024 [31] - Roto-Rooter management is implementing initiatives to improve the commercial sector, including adding commercial sales staff and enhancing customer relationship management capabilities [56] - The company is optimistic about VITAS maintaining above-average historical growth through organic growth and potential acquisitions [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in VITAS's ability to continue strong admission and census growth, citing no headwinds from demand for hospice services [40] - The company acknowledged challenges in the commercial sector of Roto-Rooter but believes that retraining efforts will take multiple quarters to yield results [26] - Management noted that the demand for hospice services remains strong, and they are optimistic about future growth opportunities in Florida [47][66] Other Important Information - The company has received a Certificate of Need to provide hospice services in Pasco County, Florida, representing a significant growth opportunity [47] - The retention bonus program in 2023 contributed 397 basis points to the year-over-year improvement in the adjusted EBITDA margin for 2024 [12] - The average length of stay for patients was 100.6 days in Q2 2024, compared to 99.5 days in the same quarter of 2023 [33] Q&A Session Summary Question: Long-term runway for census growth at VITAS - Management believes that as long as they continue to attract and retain staff, there are no limitations on growth, and they do not foresee any demand headwinds for hospice services [40] Question: M&A pipeline opportunities - The company is actively discussing potential acquisitions and is focused on markets where they can efficiently service community needs [97] Question: Roto-Rooter's longer-term growth trajectory - Management views the long-term potential for Roto-Rooter to be in the 5% to 6% range for top-line growth, with price increases and potential acquisitions contributing to this growth [45][101] Question: Trends exiting Q2 for Roto-Rooter - Management anticipates some sequential improvement in the second half of the year, with commercial revenue showing positive momentum [108] Question: Length of stay metrics - Management indicated that while the average length of stay has declined slightly, the median length of stay has increased, reflecting improved patient care [116]

Chemed Corporation (CHE) reported adjusted earnings per share (EPS) of $5.47 in the second quarter of 2024, up 34.1% year over year. However, the figure missed the Zacks Consensus Estimate by 1.3%. The company's GAAP EPS was $4.65, up 32.5% from last year's reported figure. Revenues in Detail Revenues in the reported quarter improved 7.6% year over year to $595.9 million. The metric missed the Zacks Consensus Estimate by 1.2%. Segmental Details Chemed operates through two wholly owned subsidiaries — VITAS ( ...

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Investors should be m ...

CONTACT: Michael D. Witzeman (513) 762-6714 Changes to Non-GAAP Metrics For the quarter-ended June 30, 2023, the pretax and after-tax Retention Program expense was $12.8 million and $9.7 million, respectively. For the six-months ended June 30, 2023, the pretax and after-tax Retention Program expense was $23.7 million and $18.0 million, respectively. There was no material impact on financial results for the quarter or six months-ended June 30, 2024 as a result of the Retention Program. Roto-Rooter segment op ...

Chemed Corporation (CHE) is primed to grow in the upcoming quarters, backed by the promising prospects of the VITAS business. The company is set to capitalize on the positive trends of the global Hospice industry. Moreover, sound financial stability appears encouraging. However, the uncertainty of the macroeconomic challenges and competitive pressure remain our concerns for Chemed's operations. Upsides Favorable Hospice Industry Trends: Within the Hospice segment, we believe that Chemed is well-poised to re ...

CINCINNATI--(BUSINESS WIRE)--Chemed Corporation (NYSE:CHE) today announced that it will deliver a presentation at the Bank of America Securities Health Care Conference 2024 on Tuesday, May 14, 2024, at 1:40 PM (PDT) at the Encore at the Wynn Las Vegas.The presentation will be webcast live and can be accessed, along with the presentation materials, through the Chemed website at www.chemed.com (Investor Relations). The webcast replay will be available within 24 hours of the live presentation and will be acces ...

CINCINNATI--(BUSINESS WIRE)--Chemed Corporation (NYSE:CHE) today announced that it will deliver a presentation at the Bank of America Securities Health Care Conference 2024 on Tuesday, May 14, 2024, at 1:40 PM (PDT) at the Encore at the Wynn Las Vegas. The presentation will be webcast live and can be accessed, along with the presentation materials, through the Chemed website at www.chemed.com (Investor Relations). The webcast replay will be available within 24 hours of the live presentation and will be acce ...

101 The following materials from Chemed Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) The Condensed Consolidated Balance Sheet, (ii) The Condensed Consolidated Statement of Income, (iii) The Condensed Consolidated Statement of Cash Flows, (iv) The Condensed Statement of Equity, and (v) Notes to the Condensed Consolidated Financial Statements. 104 The cover page from the Company's Quarterly Report on Fo ...

Financial Data and Key Metrics Changes - In Q1 2024, VITAS reported an average daily census (ADC) of 19,665 patients, a 10.3% increase year-over-year and a 1.6% increase sequentially [26][37] - Roto-Rooter generated quarterly revenue of $235.2 million, a decrease of 5.8% compared to the prior year [43] - Adjusted EBITDA at Roto-Rooter for Q1 2024 totaled $60.7 million, a decrease of 15.6% year-over-year, with an adjusted EBITDA margin of 25.8%, down 299 basis points from the prior year [57][78] Business Line Data and Key Metrics Changes - VITAS experienced a 4.5% increase in admissions, totaling 16,911 in Q1 2024, with growth across all segments [82] - Roto-Rooter branch residential revenue declined by 3.5% to $162.9 million, while commercial revenue decreased by 10.5% to $53.7 million [43][55] - Average revenue per patient day for VITAS was $203.8, up 212 basis points from the prior year [42] Market Data and Key Metrics Changes - Roto-Rooter faced a 9.1% decline in overall call volume compared to the prior year quarter, attributed to macroeconomic concerns and increased competition [73][89] - The residential revenue decline was within expectations, reflecting ongoing consumer sentiment challenges [50][63] Company Strategy and Development Direction - The company is focusing on integrating the recently acquired Covenant Health and Community Services, which is expected to enhance operational and financial performance [40][83] - Roto-Rooter is implementing strategies to improve commercial revenue performance, including increasing touchpoints with key accounts and upselling opportunities [21][79] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that macroeconomic issues have impacted both residential and commercial segments, but expressed confidence in the long-term growth potential of Roto-Rooter [12][14] - The company remains optimistic about VITAS's growth trajectory, citing strong hiring and retention metrics [48][92] Other Important Information - The company reported a significant increase in marketing expenses due to changes in Google search algorithms, which negatively impacted Roto-Rooter's margins [39][80] - The acquisition of Covenant is seen as a strategic move to expand service capabilities and patient access [83][96] Q&A Session Summary Question: How does the continued weakness in Roto-Rooter affect long-term growth potential? - Management stated that the long-term outlook for Roto-Rooter remains strong despite current challenges, emphasizing the brand's competitive advantages [14][75] Question: What are the expectations for margins moving forward? - Management indicated that while margins were impacted by increased marketing costs, they expect improvements as marketing spend normalizes [80][100] Question: How is the integration of the Covenant acquisition progressing? - The integration is proceeding smoothly, with expectations for operational synergies and improved patient service delivery [119][124] Question: What is the outlook for future acquisitions in the hospice sector? - The company is actively looking for additional acquisition opportunities, particularly in restricted markets, and remains optimistic about the M&A environment [95][121]